Hello,

Online gambling is illegal under state and Federal law. But penny auctions involve bidding for purchases. So far, Federal and state governments have not really looked to get involved with penny auctions. The Federal Trade Commission is very aware of penny auctions, but is concentrating on the ones that use bots and shills to artificially inflate the bidding. Those, they have been shutting down.

The state of the law as to online gaming and auctions currently is in flux. There are those who feel penny auctions will be outlawed, and they point to one set of facts, and then there are those who feel that they will be legitimatized, who point to another. You can read what Federal government is saying about them here on the FTC's website.

But as to Zeekler ittself, it sounds very like a Ponzi scheme as described in the literature of the Association of Certified Fraud Examiners. See link. If you are an active part of the enterprise and the government were to swoop down on it, you will lose whatever money you put into it. And the fact that you didn't know it was illegal would not be completely exculpatory. You would still have been acting in furtherance of a criminal activity anf may or may not come under suspicion by Federal authorities.

Finally, on the legislative front there's a bill in the House right now that will license, regulate and legitimatize on line gambling, but to make it less attractive, the bill seeks to ban the use of credit cards for making online bets. The speculation is that if it is decided that penny auctions are going to be considered gambling, then it's the credit card aspect of it that would make its future uncertain rather than the fact that they are gambling sites. See Link to HR 1174

So while it looks like a profitable enterprise now, its suspect in a couple of areas and it's future prospects, even if it is not a Ponzi fraud, are shaky given the changing shape of the law.